Our office is across Victoria Avenue from the County’s Hall of Justice where the majority of foreclosure auctions in Ventura County are held every day at 11:00. I was interested in a particular commercial property scheduled for sale yesterday, and so for those interested in what happens at a foreclosure auction read on…

With the record number of foreclosures now days, auctions are long affairs. People bring lawn chairs. Otherwise be prepared to stand for 2 plus hours with about 50 people milling around you. There were 3 “criers” – the people actually conducting the sales who represent Trustees (3rd parties who represent the Beneficiaries – the lenders). Generally, everyone there has a reason to be there. Some are investors with cash to bid. Some (like me) are watching to see what happens to a particular property. Perhaps others are the Trustors (those who borrowed the money), watching the loss of their property.

For the first half hour or so, the criers read off numerous postponements of properties scheduled for auction that day. Postponements can be for various reasons, and a common reason is bankruptcy, which always delays (“stays” is the legal term) a sale.

After all the postponements have been read off, the crowd becomes more alert and the real action starts – the actual bidding for today’s properties. The auctioneer gives out the address and other legal info about the property, makes all sorts of disclaimers that the property is being sold as is with no warrantee and then asks if there are any bidders.

Often, there aren’t, because there’s no equity in the property and the auctioneer will say going once, going twice, sold. The property goes back to the Beneficiary (the lender as collaterol) and becomes an REO property in that lender’s inventory.

But when a property comes up with equity and the auctioneer asks if anyone wants to bid, several may identify themselves as bidders. You must have cash in hand (cashiers check) to bid and must present your check to the auctioneer who will note how much you have – and thus, the max you can bid.

Now the bidding starts. The auctioneer writes down all the bids. If there’s a big spread between the opening amount and the value in the property, bidding may go up in five thousand dollar increments (who wants to spend time diddling around?). The closer the bids get towards the top, bids will be in thousand dollar increments, then $100 increments until all bidding stops. The crier then looks around, checks to see if any other bidders want one last crack, then says, “Going once, going twice, sold” and the property is gone.

That particular auctioneer then steps aside with the high bidder to collect the cash and do the paperwork while one of the other auctioneers steps in; they take turns. Sometimes if all the auctioneers are doing paperwork with a high bidder, nothing happens and everybody just waits around.

Are there deals to be had at auction? The answer is yo (yes and no).

Despite what one may hear in foreclosure seminars (easy money in your part time…), it’s a tough business and numerous pitfalls abound. Obviously, it requires cash on the barrel head. One house had spirited bidding and sold for three quarters of a million bucks.

Another property at 10135 Willamette St (Ventura) sold for $276,000 with no bidders (went back to lender). Comp sales are in the mid $300 range. But like mining for gold, you have to dig through tons of rock to fine that one ounce of gold – not an easy task.

The commercial property I was watching? It went back to the lender for $3.7 million. Now it’s time for me to go to work!